no. 22 - strengthening palestinian public institutions

8/9/2019 No. 22 - Strengthening Palestinian Public Institutions

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Independent Task Force Report

Strengthening Palestinian Public

Institutions

Sponsored by the Council on Foreign Relations

Michel Rocard, ChairmanHenry Siegman, Project Director

Yezid Sayigh and Khalil Shikaki, Principal Authors

The Council on Foreign Relations acknowledges with gratitude the generous financialsupport given to this project by the European Commission and the government of Norway.

The Council on Foreign Relations, Inc., a nonprofit, nonpartisan national membershiporganization founded in 1921, is dedicated to promoting understanding of internationalaffairs through the free and civil exchange of ideas. The Council's members are dedicated tothe belief that America's peace and prosperity are firmly linked to that of the world. Fromthis flows the Councils mission: to foster America's understanding of other nations their

peoples, cultures, histories, hopes, quarrels, and ambitions and thus to serve our nationthrough study and debate, private and public.

THE COUNCIL TAKES NO INSTITUTIONAL POSITION ON POLICY ISSUES ANDHAS NO AFFILIATION WITH THE U.S. GOVERNMENT. ALL STATEMENTS OFFACT AND EXPRESSIONS OF OPINION CONTAINED IN ALL ITS PUBLICATIONSARE THE SOLE RESPONSIBILITY OF THE AUTHOR OR AUTHORS.

The Council on Foreign Relations will sponsor an Independent Task Force when (1) an issueof current and critical important to U.S. foreign policy arises, and (2) it seems that a groupdiverse in backgrounds and perspectives may, nonetheless, be able to reach a meaningful

consensus on a policy through private and nonpartisan deliberations. Typically, a Task Forcemeets between two and five times over a brief period to ensure the relevance of its work.

Upon reaching a conclusion, a Task Force issues a report, and the Council publishes its textand posts it on the Council website. Task Force Reports can take three forms: (1) a strongand meaningful policy consensus, with Task Force members endorsing the general policythrust and judgments reached by the group, though not necessarily every finding andrecommendation; (2) a report stating the various policy positions, each as sharply and fairly


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as possible; or (3) a "Chairmans Report," where Task Force members who agree with theChairmans Report may associate themselves with it, while those who disagree may submitdissenting statements. Upon reaching a conclusion, a Task Force may also ask individualswho were not members of the Task Force to associate themselves with the Task Force Reportto enhance its impact. All Task Force Reports "benchmark" their findings against current

administration policy in order to make explicit areas of agreement and disagreement. TheTask Force is solely responsible for its report. The Council takes no institutional position.

For further information about the Council or this Task Force, please write the Council onForeign Relations, 58 East 68th Street, New York, NY 10021, or call the Director ofCommunications at (212) 434-9400. Visit our website at www.foreignrelations.org.

Copyright 1999 by the Council on Foreign Relations, Inc.All rights reserved.Printed in the United States of America.

This report may not be reproduced, in whole or in part, in any form (beyond that copyingpermitted by Sections 107 and 108 of the U.S. Copyright Law and excerpts by reviewers forthe public press), without written permission from the publishers. For information, writePublications Office, Council on Foreign Relations, 58 East 68th Street, New York, NY10021.

ContentsForeword by Leslie H. GelbAcknowledgments by Henry SiegmanPreface by Michel Rocard

Task Force MembersExperts Group MembersGlossary of AcronymsExecutive SummaryTask Force ReportI. Introduction

IntroductionThe Oslo FrameworkThe PLOIsraeli PolicyInternational Donor Community

Terms of ReferenceII. Constitutional Framework and Political InstitutionsIntroductionConstitutional FrameworkExecutiveLegislatureJudiciary

III. Operational Institutions


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IntroductionContextual and Background FactorsPublic Sector Management: Public Administration, Personnel, and PlanningPublic AdministrationPersonnel

PlanningPublic FinanceSocial ServicesEconomyPolice Force

Additional ViewsBackground and Briefing PapersGlossary of Palestinian-Israeli AccordsAbout the AuthorsOther Reports of Independent Task Forces

Foreword

To date, there has been no comprehensive and systematic assessment of the institutions of thePalestinian Authority, its structure and procedures, its ability to set priorities and to allocateresources, and its transparency and accountability. Nor has there been systematicexamination of overlap between institutions and of institutional redundancy, or the effect ofthis redundancy on decision-making. This Task Force is the first such undertaking.

Unlike most other Independent Task Force Reports sponsored by the Council on ForeignRelations, this one on Strengthening Palestinian Public Institutions is not focused on U.S.policy. It does not take positions on the Middle East peace process, nor does it address the

issue of Palestinian statehood. Its goal, instead, is a practical one: to assist the PalestinianAuthority and organs of the international communitythe World Bank, the InternationalMonetary Fund, the United Nations, the European Union, and the donor community workingwith the Palestinian Authorityto improve the efficiency and credibility of the emergingPalestinian self-governing institutions. The distinguishing characteristics of this Task ForceReport are its practical and detailed guidelines for the development of sound institutions andgood governance.

The Task Force finds that despite its significant achievements, the Palestinian Authority mustmake extensive changes to ensure good governanceincluding a participatory politicalsystem, a pluralist civil society, sustainable development, and a free market economy

during transition to a permanent settlement and beyond. Among other measures, the reporturges that the Palestinian Authority adopt a constitution, establish accountability for theexecutive branch to the legislature, centralize all public revenues and expenditures in theMinistry of Finance, encourage devolution of programs and projects not related directly tothe conduct of the presidency to appropriate ministries and municipalities, and ensure theindependence of the judiciary.

Confidence in the Palestinian Authoritys institutions affects its contest for legitimacy with


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elements that reject the Oslo accords and claim to do a better job than the PalestinianAuthority at delivering certain services to the Palestinian people. This confidence bears onthe Palestinian Authoritys ability to negotiate with Israel and affects Israels confidence inthe Palestinian Authoritys ability to implement agreements. Good governance is therefore anecessary condition for the success of the peace process.

It is particularly encouraging that the Task Force, by way of follow-up to its report, willcontinue to serve as an advisory body to assist the Palestinian Authority in prioritizing andimplementing the reports recommendations.

The Task Force comprised an unusually distinguished group of European, Middle Eastern,and American statesmen. I would especially like to thank Michel Rocard, Henry Siegman,Yezid Sayigh, and Khalil Shikaki for their hard work and commitment to this project. Theimpressive report they have produced should serve as a significant contribution not only toPalestinian institution-building but to Middle East peace as well.

Leslie H. GelbPresidentCouncil on Foreign Relations

Acknowledgments

The Council on Foreign Relations is indebted to the distinguished members of the Task Forcefor their careful review of and important contributions to the various drafts of this report. Wethank members of the Experts Group for their dedicated and hard work at the many meetingsin Ramallah, for their interviews with key Palestinian officials, and for their drafting

contributions.

Because this project involved participants on three different continents, special thanks go tothe Center for Palestine Research and Studies, which served as secretariat for the project inthe West Bank and Gaza Strip, and especially to Olfat Hammad for her coordination of themeetings of the experts. The Center also produced an Arab-language version of the ExecutiveSummary and of the full report. My thanks also to Jonathan Paris, fellow at the CouncilsU.S./Middle East Project, for his effective coordination among the various parties, and to myexecutive assistant, Barbara McCurtain.

Above all, I am indebted to Les Gelb, president of the Council, without whose counsel and

support the work of the U.S./Middle East Project would not have been possible.

The Council on Foreign Relations acknowledges with gratitude the generous financialsupport given to this project by the European Commission and the government of Norway.Special thanks to Ambassador Miguel Angel Moratinos and Ambassador Terje Roed-Larsenfor the constancy of their friendship and support, and to Michel Rocard for his balanced,wise, and steady chairmanship of the Task Force.


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From Yezid Sayigh and Khalil Shikaki, the principal authors of this report, I learned a lessonin the meaning of academic integrity and civic courage I will not soon forget.

Henry Siegman

Project Director

Council on Foreign Relations

Preface

The Palestinian Authority administers 2.9 million people, a population greater than that ofMauritania, Gabon, Kuwait, Mongolia, or Slovenia. In fact, more than fifty member states ofthe United Nations have smaller populations than that of the Palestinian Authority. However,the Palestinian Authority is not yet a state. Its formation and the recognition of its identity goback to September 1993, when Israel and the Palestine Liberation Organization (PLO) signedthe Oslo accords in Washington, D.C.

Although the Palestinian Authority does not have complete control over the entry anddeparture of its own citizens, over travelers who visit it, over the goods it trades, or over itslimited mineral resources, and the areas it controls lack geographic contiguity, the PalestinianAuthority has come a long way since its establishment. A legislative assembly has beenelected under conditions recognized as democratic; public services have begun to operate; anadministrative structure is being established; pluralism is emerging; freedom of religiousbelief is practicedalthough freedom of the press remains a serious problem; and, despiteshocks mostly due to Israeli closings of the borders, the economy is showing signs ofprogress.

The emergence of what may become a democratic, secular, and pluralist society in the Arabworld is of particular significance. If the Palestinian Authority succeeds in creating a modernsociety that fully respects human rights and the principles of the United Nations, it will be anachievement of interest to the entire world. The symbolic dimension is obvious. It influencesboth the survival of a people and the peace of a sensitive region. Above all, it is ofsignificance to the Arab world if Palestinians, so fragile and disadvantaged, are neverthelesscapable of creating a society fully adapted to the standards of the modern world.

Clearly, the task of nation-building is far from complete. Political stability is uncertain andinstitutional stability even more so. Our recommendations aim to strengthen the PalestinianAuthority and its institutions.

We believe the implementation of the recommendations contained in this report will bringabout improvements in the running of the Palestinian Authority and in the quality of life ofthe Palestinian people. It will also inevitably enhance the future state, however defined, towhich the final-status negotiations may give rise.

For me, a former prime minister of France and current president of the Development andCooperation Committee of the European Parliament, it has been an honor to have been


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entrusted with chairing the work carried out by this Task Force. Its members strongsympathy for the cause of peace in the Middle East and for the consolidation of thePalestinian Authority has made this task a moving enterprise for me, one that incidentally hasproduced deep friendships.

Regarding this, we owe many thanks to the Council on Foreign Relations, and especially toHenry Siegman for having the initial idea of this project and for having obtained PresidentYasir Arafats encouragement and cooperation. Thanks are also due to Mr. Siegman forhaving assured the financial support of the European Union and the government of Norwayto make possible the logistical and administrative backup for the entire operation.

Michel Rocard

Task Force Chair

Members of the Task Force

CARL BILDT is Chairman of Swedens Moderate Party. He was Prime Minister of Sweden.HANS-DIETRICH GENSCHER was Foreign Minister of Germany.FELIPE GONZALEZ is Deputy President of the Socialist International. He was PrimeMinister of Spain and Secretary General of its Socialist Party.ABDLATIF AL-HAMAD is Director General and Chairman of the Board of the Arab Fundfor Economic and Social Development in Kuwait.LEE HAMILTON* is Director of the Woodrow Wilson International Center for Scholars.He was a U.S. Congressman for 34 years and served as Chairman of the House Committeeon International Relations.DOUGLAS HURD is Deputy Chairman of Coutts & Co. He was Foreign Secretary of the

United Kingdom.NANCY KASSEBAUM BAKER was U.S. Senator from Kansas.OTTO GRAF LAMBSDORFF is Chairman of the Board of the Friedrich-NaumannFoundation. He was Minister of the Economy in Germany.JACQUES DE LAROSIERE is an Adviser of Banque Paribas. Formerly he was ManagingDirector of the International Monetary Fund, Governor of the French Central Bank, andPresident of the European Bank for Reconstruction and Development.TERJE ROED-LARSEN is Special Adviser to the Foreign Minister of Norway. He wasU.N. Special Coordinator in the Occupied Territories.MIGUEL MORATINOS is European Union Special Envoy to the Middle East PeaceProcess. He was Ambassador of Spain to Israel.

ROMANO PRODI is President-Designate of the European Commission. He was PrimeMinister of Italy.MICHEL ROCARD is President of the Committee on Development and Cooperation of theEuropean Parliament. He was Prime Minister of France.Chairman HENRY SIEGMAN is Senior Fellow on the Middle East and Director,U.S./Middle East Project, Council on Foreign Relations.MARIO SOARES is President of the European Movement. Formerly, he was President ofPortugal.


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DICK SPRING is Labor Party Spokesperson and Member of Parliament of Ireland.Formerly he was Deputy Prime Minister and Foreign Minister of Ireland.DOV ZAKHEIM is Chief Executive Officer of SPC International. He was U.S. DeputyUndersecretary of Defense in the Reagan administration.

Note: Institutional affiliations are for identification purposes only.*Individual largely concurs with the statement but submitted an additional view.

Members of the Experts Group

Samir Abdullah

Chair, Arab Economists Association, Ramallah Publisher of Palestine Economic Pulse

Gabi Baramki

Consultant, Ministry of Higher Education, Ramallah

Rex Brynen

Associate Professor, Department of Political Science, McGill University, Canada

Eugene Cottran

High Court Judge, United Kingdom

Ibrahim Dakkak

Deputy head of Palestine Economic Policy Research Institute (MAS), Ramallah

Basem Ezbidi

Professor, An-Najah University, Nablus

Ihab Abu Ghosh

Head of Legal Aid Center, Ramallah

Izzat Abdul Hadi

Head of nongovermental organization's network, Ramallah

Jamil Hilal


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Senior Researcher, Ramallah

Rick Hooper

Director, FAFO Program for International Cooperation and Conflict Resolution, Oslo,Norway

Nasr Abdul Karim

Former Dean of Economics, An-Najah University, Nablus

Anis Kassim

Attorney, Amman Member of Palestine National Council

Marwan Khawaja

Researcher, FAFO, Oslo, Norway

Camille Mansour

Director, Center of Law, Birzeit University, Ramallah

Jamil Rabah

Ph.D. Candidate, Ramallah

Eberhard Rhein

Political Adviser, European Policy Centre, Brussels Former Director for Mediterranean and Middle East/North Africa, European

Commission

Ramzi Rihan

Vice President of Development and Planning, Birzeit University, Ramallah

Taleb Sarie

Associate Professor, University of Jordan, Amman

Hashim Abu Seido


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Deputy Projects Manager, Welfare Association Consortium (PINGO), Gaza

Salah Abdul Shafi

Head of the Development Resource Center, Gaza

Theodore Sorensen

Attorney, Paul Weiss & Rifkind, New York Former Senior Adviser to President John F. Kennedy

Raji Sourani

Director, Palestinian Center for Human Rights, Gaza

Denis Sullivan

Professor, Northeastern University, Boston Consultant to World Bank in West Bank/Gaza

Salim Tamari

Director of Institute for Jerusalem Studies Professor of Sociology, Birzeit University, Ramallah

Glossary of Acronyms

CGPA Core Group for Public Administration

GCI General Control Institute

GPC General Personnel Council

MHE Ministry of Higher Education

MLG Ministry of Local Government

MOE Ministry of Education

MOF Ministry of Finance

MOH Ministry of Health


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MOPIC Ministry of Planning and International Cooperation

MSA Ministry of Social Affairs

PA Palestinian Authority

PADU Public Administration Development Unit

PCBS Palestinian Central Bureau of Statistics

PDP Palestinian Development Plan

PECDAR Palestinian Economic Council for Development and Reconstruction

PF (Palestinian) Police Force

PLC Palestinian Legislative Council

PLO Palestine Liberation Organization

PNC Palestine National Council

PNLA Palestinian National Liberation Army

PPIP Palestinian Public Investment Plan

PRCS Palestine Red Crescent Society

PSRC Public Sector Reform Committee

SSM Social Services Ministries

UNRWA U.N. Relief and Works Agency

WBGS West Bank and Gaza Strip

Executive Summary

The Interim Period of Palestinian Self-Government Arrangements in the West Bank andGaza Strip as stipulated in the Declaration of Principles signed by the PLO and the state ofIsrael on September 13, 1993, came to an end on May 4, 1999. During that period the twoparties signed additional agreements on the transfer of functional and territorial jurisdictionto the Palestinian Authority, which assumed direct responsibility for the conduct of daily lifeand for cooperation and coordination with Israel in a wide range of spheres.


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Progress toward a permanent settlement of the decades-old conflict between Palestinians andIsraelis, as well as toward peaceful relations in the region, requires the establishment of acapable, credible, and meaningful Palestinian political entity. Good governance is anecessary condition for the success of the peace process, and therefore all parties bear aresponsibility to assist and facilitate the strengthening of Palestinian public institutions.

The United States, the European Union, Norway as chair of the international donorcommunity, and the international community as a whole hold this view firmly. They havedemonstrated a sustained commitment to these goals, extending strong political support,reassurance, and diplomatic input to the process. Moreover, the international communitypledged $4.1 billion in assistance for Palestinian reconstruction and development in 199498,of which some $3.6 billion was committed against specific projects and $2.5 billion wasactually disbursed by the end of 1998. Around 10 percent of total disbursement was directedtoward Palestinian institutionbuilding.

The construction and consolidation of effective and democratic governing institutions based

on transparency and accountability is a major step on the road to attaining genuine self-determination for the Palestinians, peace and security for Israel and its neighbors, andstability for the region as a whole. It is the basis for the Palestinians to gain ownership overthe assistance, investment, and planning programs that are at present shepherded by theinternational donor community and its representative institutions on the ground. Ownership isnecessary for the Palestinians to make a successful transition from externally assistedemergency rehabilitation and post-conflict reconstruction to sustainable social and economicdevelopment, greater self-reliance, and confident competitiveness in global markets.

A primary goal of the Palestinian Authority, and of its partners and counterparts in Israel andthe international community, should therefore be to achieve good governance, based on the

following:

a constitutional government; political accountability and judicial review; the transparent and accountable management of public resources; the rule of law and citizens' rights; democratic participatory politics and pluralist civil society; and an effective and responsive public administration.

The issue is not only one of organizationthat is, of the structures composed of individualsworking toward common ends. Even more important, it is one of the rules, norms, andpractices that define public institutions and their operating culture and determine relationswith their constituents. The Palestinians are moving into a new and decisive phase in theirnational history, and the purpose of this report is to assist in identifying what needs to bedone in order to make that transition successfully.

Purpose of the report

This report performs both diagnostic and prescriptive functions with respect to the public


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institutions of the Palestinian Authority. Its three objectives are as follows:

to determine the actual condition and effectiveness of those institutions; to identify the difficulties they have encountered and the impediments to their

effective functioning; and to propose practical measures to improve their effectiveness and credibility in themedium to long term.

To these ends, the report assesses Palestinian public institutions in relation to the followingfour requirements:

accountability to lawfully established political bodies legitimized by popularmandate;

operation in accordance with a clear legal and regulatory framework, providingtransparency, accountability, and judicial review;

responsiveness to the participation and consultation of civil society bodies, including

nongovernmental organizations, political parties, and the private sector; and effectiveness and efficiency in performing set tasks and mandates and in mobilizing

and utilizing public resources.

The report is intended for use by four audiences: first, members of the executive, legislative,and judicial branches of the Palestinian Authority; second, senior civil servants and policeofficers in the Palestinian Authority; third, nongovernmental organizations and other private-sector and civil-society associations in the West Bank and Gaza Strip; and fourth, thegovernments and multilateral institutions providing and coordinating international assistanceto the Palestinians. For this reason the report is being issued in both English and Arabic, andthe Task Force proposes to follow up its main recommendations through a continuing

dialogue with the Palestinian Authority and other relevant bodies.

The Nature of the Challenge

The Palestinian Authority assumed its responsibilities under conditions of particularadversity and complexity for a governing institution in a post-conflict situation. ThePalestinian Authority was expected, under exceptionally difficult circumstances, to buildpublic institutions capable of promoting good governance, a democratic political system andpluralist civil society, and a free market economy. By the end of the stipulated InterimPeriod, it was directly responsible for the civilian affairs of 95 percent of the Palestinians,other than those living in East Jerusalem.

Yet the Palestinian Authority has lacked undisputed control over key resources such as land,water, and contiguous territory. It does not have exclusive jurisdiction over the legal andadministrative systems that serve its population, nor does it have unfettered access to externalmarkets. A large share of its operating budget remains dependent on transfers of taxes andduties collected by Israel on its behalf, reaching 40 percent of the Palestinian Authoritysdomestic revenue in 1998.


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Furthermore, by May 1999 Israel still exercised full control over 71 percent of the West Bankand 30 percent of the Gaza Strip, and over the movement of people and goods between thetwo areas and within them. Israel also held responsibility for overall security in an additional19 percent of the West Bank that came under the territorial and functional control of thePalestinian Authority, and in which roughly half the local Palestinian population resided.

Finally, Israel has retained complete control over all external borders, airspace, territorialwaters, and the electromagnetic sphere of the West Bank and Gaza Strip.

Within these parameters the Palestinian Authority was expected both to construct a pluralistpolitical system and maintain law and order internally, and to enhance peace with Israel andsecurity for Israelis externally. It has confronted these challenges in a political atmospherethat was highly charged and marred by violence. At the same time it was also required topursue difficult negotiations with Israel over the transfer of additional territory, while dealingin a peaceful and orderly manner with issues of major contention such as Israeli settlementactivity, house demolitions, and border closures.

In the five years since its formation, the Palestinian Authority has succeeded in thefollowing:

establishing a functioning cabinet; conducting general elections for the presidency and the Legislative Council; delivering education, health care, and other basic services; revitalizing tax collection; drafting enabling legislation and regulatory frameworks for the conduct of public

administration and of private economic and commercial activity; and maintaining security and public law and order.

The Palestinian Authority should be measured against performance in the real world, not an

ideal one. It has achieved levels of service delivery, revenue mobilization, financialaccountability, and utilization of international assistance that are at least commensurate with,and in some aspects exceed, those in countries of comparable development and income.Recent data show an upward trend in key social and economic indicators. Because theseimpor-tant achievements tend to be overlooked in reports such as ours that focus primarily onremedial action, they deserve special emphasis.

Yet much remains to be done. The Palestinian Authority suffers shortcomings that rangefrom insufficient institutionalization of citizens rights and the concentration of executivepower, through the use of large-scale public-sector hiring to ease unemployment and toreward political loyalty, to instances of police violence and flawed financial management.

The Palestinian Authority faces the same dilemma other emerging economies do: everyadvance in raising standards of living and promoting economic growth heightens consumerexpectations and deepens the need for capital-intensive and technologically advancedimports. Similarly, social and economic development coupled with population growthpropels rapid urbanization, which in turn poses complex challenges for the provision ofinfrastructure, services, and other resources, and highlights the need for effective local


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government.

The Palestinian Authority faces additional challenges that will impose an increasing burdenon its human and financial resources and organizational capacity in the future. Foremost is apopulation with a very high natural growth rate that will add an estimated 1.8 million

Palestinians to the 2.9 million already living in the West Bank and Gaza Strip, including EastJerusalem, by 2010. Additionally, since 1991 the West Bank and Gaza Strip have receivedlarge population inflows as Palestinians have lost residence and employment in Kuwait,Libya, and Algeria. To this must be added the potential impact of the possible return ofPalestinian refugees of the 1948 and 1967 wars from the diaspora.

Population growth poses an increasing demand for public infrastructure and services, andtherefore a continuing need for appropriate expansion in public administration, hiring, andfinance. This is a consideration that both the Palestinian Authority and the internationaldonor community must take into account when recommending and designing reforms. Yetexcessive and nonproductive public-sector hiring has already shackled the Palestinian

Authority with the paradoxical mix of a large wage bill and low pay, and a future pensionrequirement that it cannot meet. Furthermore, every advance in providing publicinfrastructure involves long-term, recurrent costs for operation and maintenance. Debtmanagement will therefore soon become an additional challenge.

The Palestinian Authority and the public alike should conclude from the nature of thesechallenges that present policy and practice cannot be sustained. The international communityhas recently pledged $3.3 billion in assistance for 19992004, but it neither will nor canmaintain financial and technical assistance at these levels indefinitely, whatever its politicalcommitment to Palestinian-Israeli peace and to Palestinian self-determination.

The political and material circumstances, both past and present, are difficult. External actors,including Israel, are responsible for helping resolve problems to which they have contributed.However, this does not make it any less incumbent on the Palestinian Authority to addressthe flaws and gaps in its institution-building and to strive constantly for improvedperformance and more effective and accountable governance.

It is imperative for the Palestinian Authority, in its own interest, to demonstrate its ability tosee and acknowledge its own shortcomings and to take ownership of the reform process byleading it. The end of the stipulated Interim Period offers a timely opportunity to usher in anew phase of constitutionality and reform as the Palestinians move toward full self-determination. That opportunity should be seized.

Strengthening Public Institutions Under Adversity

It must be recognized that the Palestinian Authority has had to establish and operate effectivepublic institutions in a short time span within a framework of limited territorial jurisdiction;geographical fragmentation; nonsovereign control over land, population, and naturalresources; and stringent security obligations toward Israel. The time span and frameworkhave often impeded the development of optimal institutional structure and proper practice.


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They also have imposed at times contradictory requirements on the Palestinian Authority insuch areas as respect for human rights, freedom of political expression, and provision ofsecurity. The risk is that if present structures and practices go unreformed, they will shapeand even predetermine future ones in negative ways.

In the Palestinian view, many of the shortcomings and tensions arising from institution-building during the Interim Period can be remedied only in the context of sovereignstatehood. In this view, duality of control and confusion over the proper chain of command,as well as division of political authority between PLO bodies and the Palestinian Authority,exemplify the problems that arise because the Palestinians do not exercise their right to self-determination in the form of an independent state. Palestinian concern is understandable,especially if constitutional, political, and administrative arrangements designed for limitedautonomy during the Interim Period were to acquire unwanted permanency, whether bydesign or by default.

Without prejudging the outcome of negotiations between the PLO and Israel, this report

recommends reforms that are within the present powers of the Palestinian Authority toimplement even under adverse circumstances. These recommendations are fundamental tothe establishment of good governance, a democratic political system and pluralist civilsociety, and sustainable development and a free market economy during the transition to thepermanent settlement and beyond. Palestinians may regard these reforms as essential steps inthe formation of an effective, efficient, and democratic state:

1. A formal constitution or Basic Law would set forth the fundamental principlesunderlying the establishment, functions, separation, autonomy, and accountability ofthe executive, legislative, and judiciary branches of government.

2. A leaner office of the presidency, transferring routine administrative and operational

tasks to other offices, branches, and levels of government, would strengthen thepresidents ability to provide more efficient political, diplomatic, and nationalleadership, while enhancing the performance of those lesser tasks.

3. A more effective Legislative Council would exercise enforceable oversight anddecision-making authority on broad policy and budgetary issues, and be responsiblefor receiving and implementing the external audit findings of a statutorily establishedGeneral Control Institute (GCI).

4. A more independent judicial system, supervised by an autonomous Supreme JudicialCouncil, would enforce the rule of law, the sanctity of contracts, and a newlyintegrated, harmonized national legal and regulatory framework more suitable to afree society and market.

5. More transparent, accountable, and unified financial operations would improve thecost-effectiveness of public administration and employment, the capability toanticipate increased needs of a rapidly growing population, and thecomprehensiveness of both internal and external audits. They would also enhancepublic confidence.

6. A leaner public administration, with significantly reduced personnel, meritocraticrecruitment criteria, and a simpler organizational structure, would ease the financialburden and improve the effectiveness and efficiency of service delivery.


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7. A civilian-controlled police force would be subject to political, legal, and financialoversight by the Legislative Council as well as the appropriate ministries, and its role,rules, and relationship to local government would be clear to all.

The Politics of Reform

The principal challenge facing the development of effective public institutions is nottechnical, organizational, or financial, but political. The Palestinian Authority hasconsiderable human resources at its disposal, with many highly qualified professionals andan educated and skilled workforce. In addition, it has the political goodwill and materialsupport, both financial and technical, of the international community. Numerousmanagement consultancy studies and reviews identifying needs and recommending specificsolutions have already been conducted for the full range of governing institutions in the WestBank and Gaza Strip. However, what determines the effectiveness of governance is thenature of the emerging institutional culture and the manner in which the different parts of thesystem interact. It is in this sense that any improvement will be highly political, and that the

beneficial impact of reform of any type will be comprehensive.

The most serious costs to the Palestinian Authority of shortcomings in its public institutionsare also likely to be political. Opinion polls conducted in the West Bank and Gaza Stripregularly reveal dissatisfaction with the level of public services, a perception of waste andcorruption in the public administration and police, and a loss of faith in the institutions ofgovernance, particularly the Palestinian Legislative Council and the judiciary.

These negative consequences have provided ammunition to the Palestinian Authoritysdetractors in the Palestinian opposition, in Israel, and abroad. Equally serious is the possibleerosion of political support in the international donor community, with taxpayers and

parliamentarians questioning the wisdom of directing a high proportion of a limited aid "pie"to the Palestinians instead of other developing countries. Not to reform is not an option.

To strengthen and reform public institutions requires considerable political will and skills. Todo so while conducting final-status negotiations with Israel and preparing for the transition toa permanent settlement and full self-determination requires even greater courage, foresight,and perseverance. These are qualities demonstrated by the Palestinian leadership, which hasengaged constantly since 1994 in the arduous task of setting up effective self-governmentwhile negotiating further phases of the Interim Period.

The Palestinian leadership needs to be strong, capable, and self-confident in order to meet thechallenges ahead, and it is entitled to define and steer its own course accordingly. It shouldtherefore see good governance, as well as the reforms intended to bring it about, as a sourceof strength. Integral to the Palestinians exercise of genuine self-determination are theinstitutionalization of citizens rights, establishment of the rule of law, creation of a viableand independent system of justice, empowerment of civil society, invigoration of the privatesector, and delegation of authority and assertion of institutional autonomy throughout thepublic administration.


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Main Recommendations

Constitutionality

The Oslo accords and subsequent agreements between the PLO and the state of Israel formed

the framework within which the constitutional basis and legal system of the PalestinianAuthority were to be formed. The Palestinian Legislative Council (PLC) that was formedthrough general elections in January 1996 approved a Basic Law as the primaryconstitutional document of the Palestinian Authority, but this has not been promulgated bythe executive. Instead, the mixture of inherited codes and laws in effect until June 5, 1967,have been applied. This has led to accusations of overconcentration of presidential power,rule by decree, selective use of legal codes, and disregard for democratic process. The factthat the Oslo framework did not provide explicitly for the renewal or extension of thepresidency and Legislative Council has increased the perceived ambiguity of constitutionalarrangements.

1. The president of the Palestinian Authority should either promulgate the draft BasicLaw as a whole, or at least promulgate parts of it and pass them into law separately.In the latter case the separate Basic Laws should govern the legislative process,independence of the judiciary, and citizens rights. The end of the stipulated InterimPeriod and transition to the permanent settlement need not affect this, because basicconstitutional principles should remain unchanged.

2. The Palestinian Authority should establish a constitutional court, or suitably empowerthe supreme court, to ensure that laws and systems are constitutional.

The Executive

The executive branch of the Palestinian Authority follows the presidential model ofgovernment, with a high degree of concentration of power. This includes the power to issuelegal decrees in all spheres, to make appointments to the civil service and the police, toestablish or dissolve public institutions, and to disburse public funds. Much of thisconcentration of power was embodied in the Oslo framework. Yet the centralization ofauthority, detailed micromanagement, and lack of delegation of administrative authority insome fields have weakened executive ability to manage a growing and increasingly complexsystem of public administration and finance. The risk is that social and economic policy willdrift, organizational evolution will be haphazard, and public personnel will expandunchecked. Modification of current executive practice would reduce the administrativeburden on the presidency in particular, and so strengthen political leadership and

macromanagement.

1. The cabinet should formulate a plausible, consistent, and clearly articulated programfor government and adhere to it. Ministers should be enabled to operate according toset tasks and budgets that are not subject to sudden or arbitrary change or to constantrenegotiation.

2. The cabinet should be further empowered to coordinate government policies and tooversee the development and reform of public administration and the public sector


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more generally.3. The cabinet should submit the general budget to the legislature for review and

approval in a timely manner.4. Reduction of the number and range of public institutions presently attached to the

presidents office would reduce the administrative burden on the presidency and so

strengthen its ability to formulate and pursue key policy objectives.5. The presidents office should devolve to the appropriate ministries and agencies allprograms and projects that involve disbursement of funds but that do not relatedirectly and necessarily to the conduct of the presidency.

6. The Palestinian Authority should enhance the role of local government. To this endmunicipal elections should take place, and the Palestinian Authority should devolvegreater powers of service delivery, revenue collection, and public works to localgovernment and delineate responsibilities clearly between the Ministry of LocalGovernment (MLG), the Ministry of Interior, the police force, and municipalcouncils.

The Legislature

The creation of the Palestinian Legislative Council through general election and universalsuffrage in January 1996 was one of the major achievements of the Palestinian Authority.Palestinian lawmakers have accumulated valuable experience and demonstrated growingcapability to debate legislation, government policies, and budgets. However, they face aprincipal challenge to avoid marginalization and to reinforce the role of the legislature. TheOslo framework did not provide explicitly for the renewal or extension of the presidency andthe Legislative Council, raising further questions about their role and relationship beyond theend of the stipulated Interim Period.

1. The Palestinian Legislative Council should adopt a multiyear legislative agenda, as amore realistic means of organizing and completing its primary function.2. The executive authority should enable the Palestinian Legislative Council to review

the general budget more effectively, by making timely submissions to the legislatureand by adhering to its approved terms.

3. The Palestinian Legislative Council should be empowered to exercise effectiveoversight over the executive authority. To this end it is the Palestinian LegislativeCouncil that should approve the operating budgets of the judiciary and otherindependent oversight bodies, including the General Control Institute.

4. The ongoing consolidation and integration of the diverse and often conflicting bodyof laws and ordinances presently in effect in the West Bank and Gaza Strip should becompleted.

5. The legislature played a central role in drafting the Palestinian constitutionalframework for the Interim Period and should continue to play this role as thePalestinian Authority prepares for the permanent settlement. The draft Basic Lawprovides a useful starting point for any new constitutional document to be preparedfor the next phase.


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The Judiciary

The rule of law and the provision of oversight over the executive and legislative branches ofgovernment cannot be achieved without a functioning judiciary, which is equally importantfor the conduct of civil society and free market enterprise. Yet the judiciary is in a state of

disrepair. Part of the burden has been taken up by traditional social institutions and practices,while another part has been undertaken informally by public officials, such as the governorsappointed by the president of the Palestinian Authority. These mechanisms can usefullyprovide alternative dispute resolution, but excessive virtue should not be made of necessity.Such mechanisms cannot replace the need for trained and independent judges and a unifiedlegal code, without which there is a serious threat to the rule of law, public order, andenforceable contract.

1. The Judicial System Law passed by the Palestinian Legislative Council in December1998 should be promulgated.

2. The executive authority should assist the reestablishment of a Supreme Judicial

Council enjoying genuine independence.3. The powers and responsibilities of the minister of justice should be fully defined, andshould not duplicate or supplant those of the Supreme Judicial Council or seniorjudicial officers.

4. The recommendations and targets stated in the Rule of Law Strategic DevelopmentPlan issued by the Ministry of Justice in 1996 should be implemented on anaccelerated timetable, as a matter of urgency.

5. State security courts should be abolished. As a first step the executive authorityshould define their mandates clearly, make them open, allow for credible defense, andprovide for appeal to the Supreme Court.

Public Administration

Public administration in the Palestinian Authority is still weak in certain areas. These includeduplication of functions and redundancy of institutions, competing chains of command,insufficient delegation of authority, excessive compartmentalization in certain respects andlack of departmental autonomy in others, inadequacy of formal procedures, insufficiency ofinformation flows within and between institutions, and inadequacy of routine external audit.Personal and political interventions mean that internal rules and regulations do notconsistently operate as stable, institutionalized, and predictable procedures that are not easilyreversed.

1. Until the promulgation of the Basic Law or another constitutional document, laws ofestablishment defining mandates, tasks, and job descriptions should be issued for allministries and agencies.

2. A general review of public administration should be conducted with a view tosimplifying its overall structure and reducing the number of ministries and agencies.

3. The raft of reforms recommended by the Palestinian Authoritys Core Group onPublic Administration (CGPA) should be implemented without delay.

4. Internal statutes, rules, and regulations should be fully available to all public


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Ministry of Planning and International Cooperation (MOPIC), with undisputedauthority over the planning process. To this end it should receive the political supportof the cabinet and the legislature.

2. The Ministry of Planning and International Cooperation should lead duly formedsectoral working groups representing relevant "clusters" of ministries and agencies.

3. The division of responsibilities regarding public expenditure management should beclarified between the Ministry of Planning and International Cooperation and theMinistry of Finance.

4. The Ministry of Planning and International Cooperation should be confirmed as theclearinghouse for all applications for international assistance made by all ministriesand agencies.

5. Planning should take special account of anticipated increases in demand for publicinfrastructure and services as a result of population growth, social and economicdevelopment, and changing technologies and trade patterns in global markets.

Public Finance

International assistance to the Palestinians is tightly monitored by the donor countries andrepresentative institutions, but the domestic revenues and expenditures of the PalestinianAuthority lack transparency and completeness of accounts. This has led Palestinian bodies tomake accusations of financial waste, mismanagement, and misappropriation of funds,especially with regard to the 199496 period. There is a high level of internationalsatisfaction with implementing agencies such as the Ministry of Finance and the PalestinianEconomic Council for Development and Reconstruction (PECDAR), but proper financialmanagement, planning, and practice need to be strengthened further. The diversion of publicrevenue to accounts not under the purview of the Ministry of Finance has caused liquidityproblems. This has led in turn to compression of cash expenditure, costly domestic

borrowing, and accumulation of arrears. At the same time, the centralization of revenuecollection away from municipal authorities has increased the central treasurys administrativecosts, but without ensuring that transfers to local governments mandated by existinglegislation are actually made.

1. The general budget prepared by the Ministry of Finance should be submitted by theexecutive branch to the legislature for debate and approval in a timely manner. Itshould reflect all public revenues and expenditures and contain full, detailedbreakdowns of both items.

2. All public revenues should be disclosed, and should accrue to a single account underthe Ministry of Finance.

3. The regulatory frameworks and implementation mechanisms developed by theMinistry of Finance to ensure proper financial practice throughout the PalestinianAuthority should be put into effect without delay.

4. Preparation of the public payroll should be brought entirely under the Ministry ofFinance, in order to secure the separation of financial and administrative control.

5. The Ministry of Finance should assume control and management of public-sectorpension funds and provide transparent accounting for government liabilitiesgenerally.


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6. The General Control Institute should have a definitive framework of laws andregulations against which to audit the public sector and should be made answerable tothe legislature.

7. Central government should devolve collection of the property tax to localgovernment, and municipal authorities should charge the real cost of services to users.

Social Services

The ministries delivering social services have borne an especially heavy burden since theestablishment of the Palestinian Authority, and they have performed remarkably under severefinancial and administrative constraints. However, their capacity is impeded by limitedability to attract qualified staff, a lack of appropriate facilities and equipment, andinadequacies in long-term projection and planning capabilities.

1. Performance indicators and cost calculation systems should be developed and appliedin order to improve the efficiency and quality of social services delivery.

2. The social services ministries should further develop the legal and regulatoryframework enabling nongovernmental and private-sector providers to competedirectly for service delivery.

3. Forward-looking planning and projection methodologies should be developed as amatter of urgency, in order to anticipate increased demand for public services as aresult of population growth and of social and economic development.

The Economy

There is unnecessary duplication and fragmentation of ministries and agencies dealing withvarious aspects of the economy. Lack of an effective enabling legal and regulatory

environment for the proper operation of a free market economy has led to market distortinginterventions. Largely unregulated and unaccountable public import monopolies and quasi-monopolies have been created. This leads to undisclosed commercial dealings by publicservants and to privileged access for private actors to the award of contracts, licenses, andexclusive dealerships. Pledges made by the Palestinian Authority to privatize monopolieshave not yet been fulfilled, and their revenues have not been consolidated under the Ministryof Finance as promised.

1. Existing ministries and agencies dealing with the economy should be reviewed withthe aim of reducing their overall number, merging or subdividing them as necessaryin order to eliminate overlapping specialization and duplication of functions.

2. Sectoral working groups, development strategies, and other formal mechanismsshould be established for consultation, coordination, and collaboration between theministries and agencies dealing with the economy.

3. The powers of regulatory bodies should be increased and they should be madegenuinely autonomous. The Palestinian Monetary Authority should play an increasedrole in supervising the banking sector.

4. The draft laws governing taxation, investment, company registration, competition,and other economic activities should be completed and promulgated as soon as


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possible.5. The privatization of public import monopolies and quasi-monopolies established by

the Palestinian Authority should proceed as promised, and all commercialconcessions should be disclosed.

6. All public servants, both civil and police, and elected officials should be required to

disclose, and if necessary divest, private commercial interests.

Police Force

The police force established by the Palestinian Authority has ensured public law and order ina particularly difficult political and security environment and has achieved a relatively highlevel of discipline and cohesion. However, it has drawn charges of repeated abuse of humanrights, insufficient observance of due process, inadequate separation of functions andresponsibilities between its branches, occasionally violent interservice rivalries, anduncontrolled proliferation of parallel security agencies. This threatens the performance of thevarious police branches, public approval, and the confidence of Israel and the international

community.

1. The police force should be brought under clear civilian authority and should be madesubject to political oversight by the legislature. It should also be subject to externalaudit by a body that reports to the legislature.

2. The chain of command within the police force as a whole and within its separatebranches should be clarified and observed in practice.

3. The mission statements and rules of procedure drafted by the Higher Council forNational Security should be ratified, implemented, and made available for publicscrutiny.

4. Cost-effectiveness in the police force needs to be improved, in part by reducing

personnel numbers substantially.5. The police force should prohibit any form of revenue collection or commercialactivity by its various branches that are not authorized by their law of establishment.

6. The relationship between the police force and local government should be clarified.

I. Introduction

The Palestinian Authority (PA) is a creation of the Israeli-Palestinian peace process thatbegan in Oslo in 1993. For the first time, the PLO and the government of Israel negotiateddirectly with one another. The outcome of these historic negotiations was the exchange of

letters of mutual recognition and the Declaration of Principles signed in Washington, D.C.,on September 13, 1993. The PA was established upon the conclusion, in Cairo, of theAgreement on the Gaza Strip and Jericho Area on May 4, 1994. That agreement wasfollowed on September 28, 1995, by the Israeli-Palestinian Interim Agreement on the WestBank and Gaza Strip (WBGS), which set the stage for the extension of the PAs authority toadditional areas, including Palestinian population centers in the West Bank.

The Oslo framework continues to impose severe constraints on Palestinian jurisdiction and


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control in both internal and external spheres. Nonetheless, Palestinian jurisdiction hasgradually extended to additional areas and population centers in the West Bank. The PA nowhas territorial and functional control over 70 percent of the Gaza Strip and 29 percent of theWest Bank. These areas contain 95 percent of the Palestinian population, other than thoseliving in East Jerusalem, where the PA is not allowed to maintain offices or provide public

services. The PA provides civil and legal administration to the population of the WBGS,although the U.N. Relief and Works Agency (UNRWA) for Palestine Refugees in the NearEast remains responsible for a substantial share of social services, expenditure, andemployment. The PA is also responsible for internal security in 70 percent of the Gaza Stripand 10 percent of the West Bank, with the remaining areas under the overall security controlof the Israeli military government.

The Palestinians conducted their first general election on January 20, 1996. More than780,000 Palestinians resident in the West Bank and Gaza Strip, representing 75 percent of theelectorate, cast two separate votes. Palestinians living in East Jerusalem cast their votes atpolling stations in the city. The first vote was to select 88 members for the new Palestinian

Council, representing 16 electoral districts. The second vote was for the president of theexecutive authority. PLO Chairman Yasir Arafat was elected president with 88 percent of thevote. The Palestinian Council has come to be known as the Palestinian Legislative Council(PLC), while its executive authority is known as the Council of Ministers, or cabinet. ThePLC, presidency, and cabinet, together with the judiciary and the ministries and otheroperational institutions, collectively form the PA.

The Interim Period as stipulated in the Declaration of Principles came to an end on May 4,1999. The PLO and Israel conducted a first round of final status negotiations in May 1996,but have yet to begin concrete discussion of the permanent settlement. Major issues ofcontention postponed by mutual agreement in the Declaration of Principles have yet to be

addressed, and resolved. They include Jerusalem, refugees, settlements, securityarrangements, borders, foreign relations, and other matters. Whatever the details of a finalagreement on these and other issues, the Palestinian people are firmly committed to attainingself-determination in the form of an independent, sovereign state.

The construction of Palestinian public institutions in the WBGS has been extensively shapedby four factors external to the PA: the Oslo framework, the PLO, Israeli policy, and theinternational donor community.

The Oslo Framework

The Oslo accords and subsequent interim agreements have contributed positively anddecisively to Palestinian institution-building, not least by launching genuine Palestinianautonomy, by allowing the creation of the PA, and by allowing the first national elections inmodern Palestinian history. However, the transitional and open-ended nature of the Osloframework has also generated uncertainty and increased the incentive for both Palestiniansand Israelis to minimize risk. On the Palestinian side, anxiety about further progress of thepeace process and lack of assurance that it will lead to the exercise of full self-determinationin the form of an independent state have reinforced arguments for a strong and continuing


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PLO role in PA affairs.

An inadvertent consequence of the stalemate of the peace process and the resulting emphasison the political agenda has been to divert Palestinian public attention from institution-building. This weakens public demand for good governance and democratic practice. At

times, the centrality of security concerns to the peace process has come at the expense ofother budgetary priorities and undermined proper regard for human rights and the rule of law.

Moreover, the Oslo framework limits the power of the PA to pass primary legislation anddeprives it altogether of legal jurisdiction over Israelis or any activity involving Israelis in theWBGS. The PA lacks responsibility for overall security in the autonomous areas,international crossing points, and foreign relations. It also lacks general control over land,water resources, and the movement of people and goods within the WBGS. This affects thedevelopment and functioning of its executive, legislative, and judicial branches ofgovernment.

The PLO

It is worth emphasizing that it was the PLO, in its internationally recognized capacity as solelegitimate representative of the Palestinians, that signed the Declaration of Principles andsubsequent interim agreements with Israel. The PLO authorized the creation of the PA andconferred legitimacy upon it, a legitimacy that was confirmed and expanded by the 1996general election. The PLO has continued to negotiate with Israel, to maintain foreignrelations, and to sign international agreements on behalf of the PA, which lacks sovereigncharacter. The PLO also maintains its status as the representative of all Palestinians,including those of the diaspora, and is therefore the only entity that has the authority tonegotiate and guarantee a permanent settlement with Israel.

The continued relationship between the PLO and the PA has therefore been, and remains,necessary for the peace process. However, it has also had some negative effects on theconstruction of effective and viable public institutions in the WBGS and on the promotion ofgood governance. One problem is the seeming overlap between certain PLO and PAinstitutions, which is reflected in disputes over political and functional jurisdiction. One ofthe clearest examples is the PLOs Executive Committee and its parliament-in-exile, thePalestine National Council (PNC), on the one hand, and the PAs cabinet and its LegislativeCouncil on the other. Furthermore, the difficulty of distinguishing the mandates of PLO andPA institutions has impeded the promotion of key elements of good governance, especiallythe exercise of constitutional power, transparency and accountability, and the rule of law.Inherited PLO norms and practices allow arbitrary decision-making, subordinate formalstructures to informal ones, and erode due administrative and legal process. Opinion pollsshow growing public disaffection and loss of confidence in the PA. The situation is furtheraggravated by the persistence, among certain segments of the Palestinian population, of atraditional political culture that encourages deference to leaders even at the expense of goodgovernance.


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Israeli Policy

By signing the Declaration of Principles with the PLO in 1993, the government of Israelacknowledged the need for a Palestinian partner capable of providing the political, economic,and social underpinnings of genuine, long-term peace. It therefore committed itself to

facilitating the establishment of effective and viable Palestinian public institutions. Yet thepartial severance of links between the West Bank and Gaza Strip, border closures, and denialof free access to markets have had a direct and adverse impact on institution-building andgovernance in the PA.

On an administrative level, Israeli travel restrictions have compelled Palestinian publicinstitutions to build redundancy into their structure and hire additional staff to maintainparallel departments in the West Bank and Gaza Strip. On an economic level, border closuresand restricted access to domestic and external markets have made PA revenue unstable andunpredictable, thus encouraging monopolistic and other market-distorting practices.

Border closures, along with the restrictive Israeli policy regarding permits for travel to Israelor between the West Bank and Gaza Strip, led to lost opportunities worth $3 billion in directcumulative income from 199398.1 This must be measured against an economy with realGNP of $3.96 billion and real GDP of $3.32 billion in 1998. Border closures contributed to a14.5 percent decline in per capita income since 1992, pushing up to 20.1 percent the numberof Palestinians in the WBGS who lived below the poverty line in 1997. As a result, as muchas 25 percent of total international assistance disbursements to the end of 1998 were divertedinto emergency relief, instead of being spent on public investment as originally intended.

At the same time, Palestinian private investment has slowed as a result of declining sales andcompetitiveness coupled with increased costs of production and operation. Trade flows have

collapsed. Private investment in the Palestinian economy stands at only 10 to 11 percent ofGDP instead of the more usual 15 to 20 percent for countries at similar levels ofdevelopment. Associated consequences are unemployment, which has averaged 31 percent,and a 17 percent net decline in per capita income since 1994. This weakens the income taxbase, as well as purchasing power and the associated purchase and value-added taxes andimport duties. Finally, it reduces the ability of lower-income groups to pay user fees forpublic services.

Israeli restrictions on the issue of permits allowing Palestinians to enter Israel or to travelbetween the West Bank and Gaza Strip2 have further impeded the normal conduct ofPalestinian affairs. For example, whereas the permits issued to a reported 27,000 Palestinianbusiness travelers in early 1999 allowed them entry to Israel, only 4,000 of these permitsallowed them to go additionally between the West Bank and Gaza Strip.2 This has led thetwo areas to develop bifurcated economies, complicating the efforts of Palestinian publicinstitutions working to provide a unified legal and regulatory framework for both.

Market distortions have also resulted from the failure to revise some of the more restrictiveprovisions of the Paris Protocol of 1994 that forms the basis for Palestinian-Israeli economicrelations. Israeli policy has impeded implementation of preferential and free-trade


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funds and encouraged transparency and accountability in the Palestinian counterpartinstitutions. Indeed, compared with other contemporary post-conflict situations, performancein general has been outstanding.

Nonetheless, there is room for improvement. Palestinians should continue to assume greater

ownership of the planning and prioritization process. This will require that the PA play anincreasingly central role in multilateral coordination forums. These forums include the AdHoc Liaison Committee of major donors, which is composed of representatives from donorcapitals and headquarters of international organizations, and the Local Aid Co-ordinationCommittee of all donors, which is based in the West Bank and Gaza Strip. The forums are bynow well-established arenas for the PA to present its priorities for the use of donor aid andother concerns related to the socioeconomic development aspects of the Oslo process.

Not all donors have delivered fully or in a timely fashion on their pledges: they should beurged to do so without further delay. Restrictions by certain donors requiring aid to be spenton goods and services from their own nationals and companies have also limited the net

transfer of capital and technical know-how to the Palestinians.

Terms of Reference

As Palestinians prepare to enter into permanent arrangements, it is time to take stock of thePAs achievements. It is also time to point out areas in which the PA needs to improve thelevel of effective, efficient, and democratic government in order to ensure the transition togenuine and meaningful Palestinian self-determination. Of course, even with the best ofintentions and under the best of circumstances, the requirements of good governance can beblocked or derailed by external actors or by constraints imposed by the Oslo framework.However, this only underscores all the more the need for Palestinians to address any

shortcomings in their own institutional capacity, performance, and culture for which they areresponsible or capable to ameliorate and correct. No other party or partner can undertake thisrole on their behalf.

Good governance and democracy require the creation and consolidation of effective andviable institutions. These should be capable of satisfying the Palestinian populations needsin a way that ensures popular acceptance of government authority. This report assessesPalestinian public institutions and recommends specific reforms for improved governancewithin a framework that is politically relevant and responsive to local conditions. At the sametime, it seeks to apply guiding principles that are applicable globally.

Palestinian public institutions should meet four requirements:

1. Political and bureaucratic accountability. Public institutions should report, and beaccountable, to a source of legitimate authority with a clear chain of command and apopular mandate. Public servants should answer for their actions, and they should doso to independent bodies. Accountability is also a crucial ingredient of politicallegitimacy and popular acceptance, and for that reason transparency and opennessabout governmental decision-making are required. In general, public institu-tions


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need to be constitutionally established and to observe the separation of powers.2. The rule of law and due process. Public institutions should operate according to a

clearly articulated and comprehensive legal and regulatory framework, and be subjectto judicial review and adjudication. The rule of law and due process should be appliedeffectively and equally to all bodies and individuals both inside and outside

government. A fair, reliable, and independent judicial system with the support of theforces of law and order is necessary to ensure such application.3. Strong, participatory civil society. Public institutions should cooperate with and be

responsive to the institutions of civil society, including nongovernmentalorganizations, social associations, private sector actors, and political parties. For thisrequirement to be met, it is imperative that policymaking be open and predictable,especially in matters relating to public resources and resource management. It is alsoessential that full freedom of association and participation, freedom of informationand expression, and respect for social and cultural rights be ensured. In such anenvironment, the institutions of civil society would be able to question and criticizethe appropriateness of government actions. Responsive governance requires popular

powers to select and remove political representatives through a guaranteed electoralprocess. It also requires that government, especially local government, be notconducted at a distance from most of the population.

4. Competent, effective, and efficient public institutions and administration. Publicinstitutions should have clearly defined mandates, operational objectives, andstrategies and be able to generate effective policies under the direction ofpolicymakers. They should have the means to ensure proper and transparent internalregulation and accountability, and procedural methods to monitor and assessperformance. The civil service should be recruited on the basis of professionalcapability and merit, and should be able to implement policies independently ofprivate commercial interests and without corruption or patronage.

In examining Palestinian public institutions and the extent to which they meet the fourrequirements mentioned above, the study has three objectives:

to determine the actual condition and effectiveness of existing Palestinian institutions; to identify difficulties these institutions have encountered and impediments to their

effective functioning; and to propose practicable means of improving the effectiveness and credibility of these

institutions in the medium to long term.

II. CONSTITUTIONAL FRAMEWORK AND POLITICAL

INSTITUTIONS

Introduction

This section addresses the public institutions that constitute the principal elements of thePalestinian political system in the West Bank and Gaza Strip. Referred to here as "politicalinstitutions," they determine the overall purpose, program, and policy of government, as wellas the budget, structure, and regulatory framework of public administration. The political


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institutions consist of the executive authority, comprising the presidency and cabinet, thePalestinian Legislative Council, and the judiciary.

The first purpose of this section of the report is to assess the constitutional framework withinwhich the three branches of government fulfill their primary roles. Constitutionality is a sine

qua non of democracy and citizens rights, and a fundamental element for the promotion ofgood governance. The report therefore addresses the separation of powers, clarity ofmandates and delineation of authority, and checks and balances within the system.

The second purpose of this section is to assess the capacity and performance of the politicalinstitutions. It does so with particular reference to:

effectiveness in implementing primary roles and overall policy and management; ability to exercise oversight functions, including over the police; ability to establish appropriate structures and clear operating procedures; responsiveness to input from civil society; and ability to institutionalize citizens' rights.

Constitutional Framework

Context

The Palestinian Authority has operated since 1994 in a constitutional frameworkcharacterized by multiple, changing, and often contradictory legal sources. The accordssigned with Israel, starting with the Cairo Agreement of May 1994, defined the initialstructure and powers of the PA, as well as the areas of functional responsibility that were tobe immediately transferred to it by the Israeli military government in the WBGS.

However, for the purpose of setting the context within which the PA has sought to establishits constitutional basis, the most important accord is the Interim Agreement of September1995. This provided for the establishment of a "Palestinian Council," which was to assumethe responsibilities already transferred to the PA in addition to new ones now transferredfrom the Israeli military government. The council was to have legislative, executive, andudicial powers and responsibilities, and was empowered to issue a Basic Law delineating

them. A committee drawn from the council would exercise executive authority on its behalf,while the council would legislate and perform oversight functions over policy and the budget.The president, to be elected separately, would propose the members of the executiveauthority to the council for approval, and would also be an ex officio member of the

executive authority. The council would have within its jurisdiction an independent judicialsystem.

The Palestinian Council has come to be known as the Palestinian Legislative Council, whilethe executive authority is known as the Council of Ministers or cabinet. The PLC,presidency, and cabinet, together with the judiciary and the ministries and other operationalinstitutions, are taken collectively to form the PA. The absence of a Basic Law or otherconstitutional document has led to continuing legal ambiguity about the precise powers and


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responsibilities of each branch of the Palestinian government.

Given this ambiguity, two other sources of political and legal authority have affectedconstitutional arrangements in the WBGS. One is the PLO, which concluded the variousaccords within the Oslo framework to date and is responsible for negotiating the final status

of the WBGS with Israel. Its legacy is mixed. On the one hand, it has bequeathed to the PAthe foundations of a constitutional framework. In 1988, the Palestine National Council (thePLOs parliament-in-exile) committed itself to the establishment of an independent statebased on a "democratic parliamentary system," freedom of expression, equality, aconstitution, the rule of law, and an independent judiciary. On the other hand, the confusionof mandates and overlap of authority between PLO and PA institutions has impededtransparency, accountability, the rule of law, and other elements of good governance.

Most importantly, the PLO and its constituent partsthe Palestine National Council, CentralCouncil, Executive Committee, and Chairmanare imbued with a higher degree oflegitimacy and authority than the PA and its institutions: the PLC, cabinet, and president. The

legitimacy, authority, and tenure of the PA are derived from the Declaration of Principles andat the same time limited by it. The end of the stipulated Interim Period in May 1999 hastherefore complicated even further efforts to strengthen and reform PA institutions by placingthem on a clear constitutional basis. Indeed, in April 1999 the PLO Central Council decidedto prepare a new, provisional constitution in anticipation of statehood, potentiallysuperseding arrangements already in force or under consideration for the PA.

The other source of legal authority affecting constitutional arrangements in the WBGS is theextensive mixture of laws and legal traditions in force. In Gaza this consists of the Anglo-Saxon common law tradition, as applied by the British Mandate up to 1948, and elements ofcivilian and military law in force during the period of Egyptian administration up to 1967.

The legal system in the West Bank is derived from the Napoleonic tradition and theintroduction of Jordanian law in the 1950s and 1960s. In both areas the Israeli militarygovernment introduced further modifications in the form of military orders. The PA has alsoinvoked the British Defense and Emergency Regulations of the 1930s and 1940s whensetting up the state security courts, although it has not recognized the regulations to be inforce. The Interim Agreement of 1995 allows the abrogation of existing laws and militaryorders by the PA, as long as the change does not violate the terms of the agreement. Thislegal mixture continues to complicate the delineation of powers and responsibilities amongthe branches of Palestinian government.

Achievements

In 1997, the PLC approved a Basic Law in its third and final reading, following an extensivedebate in full view of the Palestinian public and with the participation of civil society bodies.The draft provides for a parliamentary democracy based on the rule of law and someseparation of powers. It affirms basic civil rights and freedoms, and seeks a strong legislaturedirectly elected by the people and entrusted with the tasks of legislation and oversight of theexecutive. The members of the legislature are to enjoy immunity. They also have the right togrant and withdraw confidence in the executive, and to review and approve its proposed


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budget. The draft Basic Law upholds the independence of the judiciary, and stipulates theestablishment of a higher judicial council responsible for the management and oversight ofthe judicial branch. It also calls for the establishment of a high constitutional court, and givesthe PLC a role in approving the executive selection of the attorney general or publicprosecutor.

The draft Basic Law also seeks to institutionalize safeguards against violations of citizensrights. The presidential decree that created the Palestinian Independent Commission forCitizens Rights soon after the establishment of the PA provided an ombudsman as anadditional safeguard. An independent judiciary provides further guarantees, while proposedlaws dealing with political parties, nongovernmental organizations, press freedom, and otherissues potentially provide further protection.

Although it has yet to be promulgated by PA President Arafat, the fact that the draft BasicLaw provides guarantees of constitutional rule in the WBGS represents a significantdeparture in Palestinian political practice. It also marks a departure from most Arab

constitutional experience by providing checks and balances to executive power, as well asmechanisms to ensure implementation of accountability. Failure to promulgate the Basic Lawby the end of the stipulated Interim Period has placed its status in doubt, but it nonethelessprovides an important starting point for any future constitutional document.

Challenges

Though some progress has been achieved, the Palestinian political system still suffers from adistinct lack of clarity regarding constitutional rules and roles. It is inevitable thatconstitutional arrangements in a transitional system should be subject to political contest andnegotiation. In this case the overlap of PLO and PA institutions has further confused the

issue. PA cabinet meetings have been replaced by weekly meetings of the "Palestinianleadership," a loosely defined gathering of the president, cabinet ministers, PLO ExecutiveCommittee members, the PLC Speaker and his deputies, and heads of the negotiating teams.Thus, a forum that is not accountable to the PLC or other PA bodies currently makes policydecisions affecting the PA.

Legal ambiguity about constitutional powers has also weakened the PLC and confused itsrelationship with the executive authority. The PLC is supposed to be the body thatdetermines overall policy and approves the budget, and thus provides oversight of thecabinet. In practice, however, government policies are formulated, implemented, andassessed by the executive authority alone. Individual ministers have often agreed to attendPLC committee hearings and answer questions, but the executive authority has no clearobligation to do so, and other ministers have refused to appear.

Accountability, especially of the executive authority, has equally suffered. In the absence of aBasic Law, PLC bylaws lack clear provisions to ensure and regulate a system ofaccountability. Moreover, the PLC has failed to use votes of confidence as an effective toolto bring the executive authority to account, and therefore lacks a credible mechanism for


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enforcing its decisions.

The absence of a constitutional court or similar authority prevents proper resolution ofdisputes of interpretation between the executive and legislative branches. Lack of anindependent judicial oversight body has allowed the executive authority to apply inherited

laws selectively. These include the British Emergency Regulations of 1945, which allow it tosuspend civil rights and due process. The same constitutional flaw removes legal restrictionson the possible use of emergency rule by the executive authority.

Indeed, in the absence of a Basic Law, the existing constitutional framework as shaped by theInterim Agreement of 1995 maintains ambiguity concerning constitutional protection ofcitizens rights, which are not formally codified at present. The executive authority has failedrepeatedly to enforce court decisions, including those issued by the Supreme Court, relatingto violations of human rights and civil liberties committed by the police. In many cases,persons released after unlawful arrest have been rearrested. The PA has invoked the BritishEmergency Regulations of 1945 to justify creating the state security courts, but its refusal

either to confirm or refute their applicability makes human rights violations possible whilesimultaneously complicating legal defense.

Constitutional ambiguity has also allowed an extension of executive power in relation to civilsociety organizations. Following the failure of early attempts to impose a restrictive lawgoverning the registration and operation of NGOs, the executive authority adopted acooperative approach. However, a more equitable draft law passed by the PLC has yet to bepromulgated by the president. The General Intelligence Directorate and the Ministry ofInterior have continued to make separate attempts to compel NGOs to report to them. Thereis also a continuing dispute between the Ministries of Interior, Justice, and Social Affairsover which should register NGOs. And the president has intervened in the operation of civil

society organizations, such as the bar association, by appointing their heads and boardmembers.

The extension of executive power has gone hand in hand with restrictions on freedom ofexpression, in particular through the various public media. To its credit, the PA does notapply formal censorship of the press, nor does it have an official censor. Yet the Palestinianpress has been subjected to intimidation by PA security agencies and to commercialpressures, resulting in self-censorship. The Ministry of Information must approve mediaapplications before issuing licenses, and several newspapers and radio stations have beenclosed down by the executive authority for varying lengths of time for expressing undesirablepolitical views. Donors ceased giving aid to the Palestinian Broadcasting Corporationbecause it failed to ensure pluralism in coverage and access. The General IntelligenceDirectorate has established a Bureau of Press Information that monitors foreign media andseeks to control their accreditation in the WBGS.

The record since 1994 indicates that as the political system has evolved, it has concentratedpower in the hands of the executive authority, particularly the president. The legislature andudiciary are marginalized, and basic civil rights and freedoms are not fully and formally

protected. The end of the stipulated Interim Period only makes it more imperative that the


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Palestinian people define their constitutional framework.

Recommendations

1. The president of the PA should either promulgate the draft Basic Law as a whole, or

at least promulgate parts of it and pass them into law separately. In the latter case theseparate Basic Laws should govern the legislative process, independence of thejudiciary, and citizens rights. The end of the stipulated Interim Period and transitionto the permanent settlement need not affect this, as basic constitutional principlesshould remain unchanged.

2. The PA should establish a constitutional court, or suitably em-power the Sup

no. 22 - strengthening palestinian public institutions

Documents